Fiat Chrysler-PSA Marriage: It’s a yes!

Discussions between Fiat Chrysler Automobiles and the PSA Group are ongoing. After acceptance by their respective boards of directors, the two European manufacturers submitted their merger plans. Peugeot shares dropped 5% on the Paris Stock Exchange immediately following the announcement and continued to decline throughout the day by -12.86%. On the other side of the Alps, the reception was more enthusiastic, with Fiat Chrysler closing up 8.56%.

Advised by Bredin Prat, for the French, and the Darrois Villey Maillot Brochier/Sullivan & Cromwell duo on the FCA side, the two companies expect to sign a memorandum of understanding in the coming weeks. In addition, the PSA group has teamed up with Morgan Stanley, Messier Maris and Perella, to which must be added the Zaoui boutique, the Peugeot family's advisor. The Italian-American firm is advised by Goldman Sachs and D'Angelin, and the family holding company by Lazard and Alain Minc.

A family history

This merger came as little surprise. Initial talks between Fiat and Peugeot date back to 2009, but the owner families refused to give up control. Since 2014, the Turin-based group, then led by Sergio Marchionne, has been constantly talking about its desire to forge alliances. In the summer of 2018, PSA announced that it was "open to all proposals (...) but it takes two to make a deal." However, in May 2019, it was Renault that seemed to be favored by FCA, until the latter withdrew its offer after a few weeks.

The proposed merger between Fiat Chrysler Automobiles and the the company with the lion badge has been officialized because the Peugeot and Agnelli families have reached an agreement on governance and capital. After the merger, the Italian participation would be higher than that of the French, at 14.5% compared to 6%, but PSA's CEO, Carlos Tavares, would serve as CEO of the future European group for at least five years. On the FCA side, the current president and grandson of Gianni Agnelli, John Elkann, would continue to serve as president. The two men would join the board of directors with five members appointed by PSA and four by FCA. The headquarters would be in neutral territory, in the Netherlands.

Equality and complementarity

The discussions would lead to a merger of equals where each company would own 50% of the new company. The merger would lead to the formation of the world's number 4 auto-manufacturer with annual sales of 8.7 million vehicles. Ultimately, synergies are expected to amount to savings of €3.7 billion per year, without taking into account plant closures.

With thirteen brands, Fiat, Chrysler, Alfa Romeo, Jeep, Abarth, Lancia, Maserati and Dodge from FCA and Peugeot, Citroën, DS, Opel and Vauxhall for France, the automotive group would have an impressive range of vehicles. For PSA, this marriage would open the doors to the lucrative American market and allow it to achieve greater growth. For its part, Fiat would benefit from Peugeot's technological advances in clean vehicles and would be strengthened in Europe.